The Welfare State - Objectives, Aims and Results

“How have the objectives of welfare legislation changed during the course of the twentieth century and how successful has the state been in fulfilling its aims?”


Welfare legislation, undoubtedly, went through a period of extreme transition during the course of the 20th Century. The state had played little or no part in people’s lives before the Liberal administration of 1906. Yet in the post-war period, the welfare state that did emerge eclipsed any previous attempt at social welfare legislation. Indeed, we may argue that the objectives of welfare legislation have come full circle by the end of the 20th Century, the decade of Thatcherism and monetarist deflation supposedly being fatal for the welfare state. Indeed, even ‘New’ Labour in 1997 differed from previous Labour administrations, with the ‘tax and spend’ ethos not as prevalent throughout policy. Therefore it becomes identifiable that we may notice the changing objectives within welfare legislation throughout the 20th Century. And yet, the supposed modern ‘attack’ on the welfare state speaks volumes for its success over time - has it stood the test of time? Have its measures failed to make a true difference? Or may we argue that, despite obvious limitations in a scheme so broad and far-reaching, welfare legislation was mostly very successful in fulfilling its aims. The British people have enjoyed the fruits of an unprecedented period of economic growth, couple with a massive increase in state spending on welfare. Yet despite palpable economic advancements, there is justified concern about the failure to distribute the benefits of such growth to all sections of the population. Therefore a clear debate emerges, surrounding the question whether or not the state has been successful in fulfilling its aims.

By the 1970’s, commentators were remarking that the welfare state appeared to be in ‘crisis’. The Labour budget of 1975 was strictly deflationary, and thus it became the first post-war government, other than during a temporary balance of payments or sterling crisis, to abandon the goal of ‘full’ employment established by the welfare state. Callaghan noted that, “higher inflation was followed by higher unemployment : that is the history of the last twenty years.” This revolution in economic thinking and policy had an immediate impact upon social policy - the full employment ethos was swept away, Beveridge’s proposed system of social security was entirely dependent upon the maintenance of a high level of employment. Furthermore, Thatcher and the Conservative monetarist policy re-think led by Sir Keith Joseph after 1975 represented a major break with post-war political and social assumptions. Thatcher’s government believed that the policies of full employment, expanding social services and corporatism had created a messy inflationary spiral. This crisis was not unique to Britain but was experience, to varying degrees of intensity, in many Western industrialised nations. The world recession, exacerbated by the stark increase in the price of oil in 1973-77, checked the economic growth the countries had enjoyed since 1945 and right-wing deflationary governments came to power. This represents perhaps the most significant example of how the objectives of the welfare state have changed throughout the course of the 20th Century. Keith Joseph noted that, “the only lasting help we can give to the poor is helping them to help themselves.” It seemed as though the Conservatives of the 1980’s were committed to dismantling the welfare state which had grown and grown since 1945. However, this simply was not true. Despite the abandonment of corporatism and the suspension of the commitment to full employment, the welfare services remained surprisingly unscathed. For all the Conservatives talk about rolling back the powers of the state public spending figures showed no rapid decline at all, inflation was the major demon to be slain through tax cuts, privatisation and acceptance of unemployment. True, any hope of expansion throughout the 1980’s was stunted by monetarism - but the welfare state survived, and continued to play its crucial role in the everyday lives of Britain’s citizens. Herein lies perhaps its most significant success - that despite political changes and policies it has remained at the core of what most citizens come to see as the essential tools of government.

However, perhaps the most startling fact about welfare legislation is its change and evolution over time. In 1900 Britain, most people lived without any direct contact with public agencies unless they were very poor. They paid no direct taxes, and received no direct benefits in cash. Since 1945, the state has come to engage directly, and frequently, with almost every citizen. The government now collects direct taxes and social security contributions from every workers pay and provides health care, an extended education system - together with cash benefits for the poor, unemployed, disabled, sick and retired. Such monolithic welfare state expansion has created a new bond between citizenry and government. In 1997 welfare expenditure accounted for 25% of the total GDP, with such vast financial scale and such extensive coverage, the management of the welfare state has become a core function of government. However, collective provision of welfare support for the poor was not a mid-twentieth Century innovation. The welfare state did not merely spring up with the Beveridge Report unexpectedly. We may chart its progress and subsequent growth from the Liberal administration from 1906 onwards. Briggs drew an important distinction between what he called a ‘social service state’ and a ‘welfare state’. The former was a state, “in which communal resources are employed to abate poverty and assist those in distress.” By this definition, the Liberal ‘welfare state’ was much closer to the model of a ‘social service state’ than to the kind of welfare state which developed after 1945. It provided very limited levels of financial assistance to selected groups of the population. In a number of important respects it failed to meet the needs of the poorest sections at all. However, despite these limitations, the Liberal reforms were also a major watershed in the history of social policy development. The introduction of free meals in schools, the establishment of old age pensions and the creation of the unemployment and health insurance schemes marked the beginning of a new approach to the development of welfare policy. Landmarks such as the Education (provision of meals) Act 1907, establishment of the School Medical Service 1908 created a brand new, and radically different, conception of the relationship between adults, children and that state. Furthermore, the Trade Boards Act of 1909 established the principle for a minimum wage and the National Insurance Act 1911 established a general scheme of insurance against ill health. However, the NI was focussed almost entirely on the industrial well-being of working men, and so unemployment benefit applied to only 2.5 million, whilst the pension applied to only 500,000.

Consequently, these Liberal reforms undoubtedly played a major role in laying the foundations for the all encompassing welfare state that would emerge later in the Century. It’s biggest achievement was perhaps in offering a genuine alternative to the deterrent and stigmatising policies of the Poor Law. Following on from this, one might argue that the World War One period can be seen to have exercised a restraining influence on the objectives of welfare legislation. Although the war caused many problems for people dependent on old-age pensions and other fixed incomes, these problems were perhaps less serious than the threat of food shortages for the population as w hole. By October 1916 food prices had risen dramatically and the government had become increasingly concerned about the dual threat posed by the prospect of poor harvest in both Britain and America and the submarine blockade by the German navy. The war undoubtedly disrupted the progress of education - yet one might also argue the war period in face had contributed to an increased sense of social solidarity which led to an increase in the number of pupils entering secondary school and the number of pupils staying on past the minimum leaving age. The war did fuel powerful desire for the creation of a better world - and although the war failed to bring about major changes in the organisation of the Poor Law, it did lead to important new developments in the provision of the health services. They key example can be the expansion of infant welfare services, which paved the way for the passage of the Maternity and Child Welfare Act 1918 which led to government subsidies for a range of services ; including the cost of hospital services for children under five, maternity hospitals and homes for children of the widowed. There can be no doubt that Lloyd George himself was committee to social reform, but he faced an increasing difficulty in achieving his objectives following the election of a vast majority of Conservative MP’s after the 1918 election. Perhaps the crucial changing objective with regards to welfare legislation was that the war created a new sense of obligation for the state in terms of the pensions paid to those who had been injured or bereaved as a result of war, which subsequently had a profound effect upon attitudes towards the role of the state in meeting these growing welfare needs.

The objectives of welfare legislation changed considerably throughout the interwar years. The period has often been seen as one of strong contrasts. One the one hand, it saw improvements in real wages, an increase in female employment opportunities, the rise of new industries, improvements in health, housing and education. On the other, however, it also experienced the rise of mass unemployment and the persistence of high levels of poverty. Tout estimated tat 10.7% of the population of Bristol was living in poverty in 1921, and that a further 20.8% was living in insufficiency. During the period between 192-28, the average annual number of unemployed insured workers never fell below one million, and it reached above two million between 1930-35. The Unemployment Insurance Act of 1920, which extended the unemployment insurance scheme to all manual workers and non-manual workers on less than £250 per annum, was proved insufficient as unemployment rose sharply : the Coalition government thus, in February 1922, introduced a personal means test for individuals claiming benefit. Webster claimed that, “welfare services were too thinly spread and too erratic to serve more than a residual function”, yet there is contrasting opinion - Crowther noting that, “the working class which entered the Second World War could call upon the resources of the state for material support more comprehensively than their predecessors in 1914.” This is true to a reasonable extent, the growth of public action and expenditure despite the hardships of the depression was one of the central features of the interwar years. Yet the most significant limitation of interwar welfare was that the provision of social services was subject to a vast range of different means tests : thus failing to adopt a subsistence basis for the granting of contributory benefits.

The watershed for welfare legislation came during the Second World War Coalition government’s tenure. The White Paper on Employment Policy (1944) was an explicitly Keynesian document which committed post-war government to “the maintenance of a high and stable level of employment.” Coupled with the infamous Beveridge Report, which advocated a comprehensive system of social insurance and house construction, set a strictly positive welfare legislation mandate for post-war governments to adhere to. The Beveridge Report proved incredibly influential, with over 500,000 copies being sold within the first few months of its publication. It promised freedom from want for all citizens, “from the cradle to the grave”, in exchanged for weekly insurance contributions from all those in employment. The emphasis placed on welfare legislation and social policy created a tide of left-leaning sentiment, and thus Churchill’s Conservatives were decisively beaten by Labour. Attlee’s government inaugurated a flurry of legislation which established the foundations and the form of the post-war welfare state : in 1946 the National Insurance Act, in 1948 the National Assistance and Children’s Act and the establishment of the National Health Service, in 1949 the Housing Act. Therefore, changes in the structure and finance of the welfare state have taken place throughout the 20th Century. A view of such expenditure growth can be gauged through study of demographic change, which imposed consistent upwards pressure on welfare spending. The number of children under fifteen rose gradually from 11.1 million in 1953 to 12.9 million in 1970. The pensioner population has expanded virtually without interruption since the Second World War, being 6.9 million in 1953 and 10.5 million in 2000. Therefore, these demographic trends suggest a necessary transition with regards to the implementation of welfare legislation. This, however, leads us to pose the question as to whether or not the state can be judged to be successful in implementing such a welfare transition throughout the 20th Century : going from minimal involvement to a considerable daily presence in the everyday lives of its citizens. Substantial cracks have appeared since the considerable involvement of the state in welfare since 1945. A significant problem has been with National Insurance. If NI was to operate on true actuarial principles, pensions could only be paid after a full contributory period of around 45 years. This, obviously, was incompatible with contemporary demand so the decision taken in 1946 to pay full pensions to all people above the qualifying age had the inevitable consequence of creating a large and growing deficit for the NI fund. Only by raising contributions without improved benefits for at least two decades could the long-term solvency of the NI scheme be re-established - but political expediency demanded the reverse, an increase in benefits, which were falling well behind as real wages rose throughout the 1950’s. The ‘solution’ was to abandon the idea of building up a fund which would cover future pension liabilities and instead to use current contributions to pay current benefits. By 1958, NI had changed from being a ‘funded’ to a ‘pay as you go’ system. Future pension liabilities were thus inextricably linked to future economic growth which would portent trouble in the future.

Furthermore, in its attempt to rid welfare of means testing, the welfare state failed. The proportion of the population receiving means tested benefits rose from 4% in 1948 to 8% in 1974, 16% in 1986 and 20 % in 1994 - a massive leap. This increase has led to many households being regarded as sufficiently rich enough to be taxed, while also being sufficiently poor to be eligible for means-tested benefits. The failure to integrate personal tax and social security systems created a number of ‘poverty traps’ in which poor households who experience a slight increase in income eliminated their benefit entitlement. However, it is also necessary to observe whether the welfare state aided in the broader pattern of combating poverty and promoting a better distribution of income, for this was undoubtedly one of its aims, especially during the Attlee period. In the immediate post-war period it seemed that the welfare state had succeeded in preventing poverty. Rowntree published a third poverty survey of York in 1951 which showed only 3% of the population lived in poverty, compared with 13% in his interwar study and 30% in 1899. Yet in the 60’s social researchers discovered widespread poverty in many families with dependent children and among pensioner households. This ‘rediscovery’ of poverty stemmed from a crucial re-definition of what is meant to be poor. In a growingly affluent society, poverty was interpreted as ‘relative’, which define households as poor if they had incomes significantly lower than the national average. This is a stark contrast to Beveridge’s definition of poverty, which became defined as having an income so low that it prevented the purchase of necessary food and shelter. This shift in perception of poverty from an absolute to a relative definition helps, therefore, to explain the apparent upsurge in ‘poverty’ during the 60’s and 70’s. The evidence from social researchers about new-found poverty seems to suggest that the welfare state failed in one of its primary goals. However, the growth in average incomes means that even those entirely dependent on benefits today have a real income far above Beveridge’s absolute poverty line - surely this implies a certain degree of success that we may attribute to the welfare state as a whole. We may assert that the welfare state was certainly unsuccessful in an attempt to re-distribute wealth. From 1964-70 there was little change in overall distribution of income, even though the Labour government was committed to a more equal society. Furthermore, the period 1979-92 exacerbated regional differences in wealth and although the average income of the entire population rose by 36%, it was the richest fifth who enjoyed the most significant real income growth, whereas the poorest tenth of the population enjoyed no real income growth at all. However, how far was the welfare state about redistributing wealth? If we gauge its success in the altogether more significant public spheres of education and health, then surely the welfare state can be said to have made a truly significant achievement.

In education, although state funding had existed since 1870, the 1944 Education Act intended to provide all children with an equal right to education up to the age of 15 (extended to 16 in 1972). Despite its success in raising literacy rates immeasurably, there emerged an inequality in terms of those who reached higher education and university. A consequence of the post-war education system was that pupils were tested at eleven, with the ‘bright’ pupils going to grammar schools and the rest to secondary moderns. Labour’s attempt to demolish the grammar schools, and the establishment of comprehensives, have done little to reduce the class divide in educational attainment. Johnson remarks that, “although all parts of the educational system are, in practice, accessible to all, universities continue too be dominated by students from middle-class backgrounds.” However ; Johnson may well be overlooking the simple success of the welfare state in education, the fact that, especially in the modern era and 21st Century, higher education truly has been opened up and is ‘accessible to all’ speaks volumes for the groundwork and foundations lain by the welfare state. In health, the primary intention of the establishment of the NHS in 1948 was to provide equality of access to health care. Although direct charges have been introduced for some minor parts of the health service, medical consultation and treatment remains free at the point of delivery - thus its aim of equality of access has been largely successfully achieved. It is questionable that although spending on the NHS has risen from 3% in the early 50’s to over 5% by the 80’s and 6% by 1999, it has not been sufficient to meet rising demand caused by the ageing of the population, the development of modern and expensive medical interventions and higher expectations of treatment and service. However, the very existence of a free health service (in contrast to America) should, in effect, speak volumes for its durable success.

In conclusion, therefore, before 1914 most social expenditure in Britain was based on the concept of a residual welfare state, a system of financial ‘safety nets’ to prevent absolute destitution on the basis of a means test. The limited scope of this early 20th Century welfare is reflected by its overall cost - public expenditure on social services accounted for just 2.3% of GDP in 1900 and 4.9% in 1920. By 1948 the welfare state was almost unrecognisable in size and character. It accounted for over 10% of GDP and was more centralised and comprehensive in terms of who was covered. The key transition, therefore, was that from a residual welfare system to an institutional welfare system, benefiting the nation as a whole, despite obvious limitations for a scheme so grand.


Bibliography :-

P. Thane, Foundations of the Welfare State
P. Thane, The origins of British social policy
A. Crowther, Social Policy in Britain 1914-39
J. Bourke, Working-class cultures 1890-1960
R. Lowe, The Welfare State of Britain since 1945
B. Harris, The origins of the Welfare State
P. Johnson, “The welfare state, income and living standards” in Floud & Johnson, Cambridge Economic History of Modern Britain (2004)
J. Hay, The origin of Liberal Welfare reform